Like the sterling, the yen has seen a swift reversal of pace over the past 36 hours; however, unlike its counterpart, the Japanese currency is retracing rather than appreciating. The more immediate concern for currency traders (and the dynamic that ultimately led the unit to an eight-month high) was commentary from the nations new Finance Minister, Hirohisa Fujii.
Seemingly countering his vow to avoid intervention on the yen’s behalf just a week ago, the policy maker said that “if the currency market moves abnormally, we may take necessary steps in the national interest.” It may seem that Fujii is flip-flopping on his position; but really he is just telling the market that such a step would only be considered under unusual circumstances – really no country can really write it off. For those with a fundamental concern that moves beyond a week, price pressures are another problem. The annual, national CPI reading for August plunged a record 2.4 percent. It seems deflation is setting in.